Last-mile delivery is sometimes referred to as “the last-mile problem.” Why? Because it is precisely when freight that has arrived at a warehouse needs to move to its final destination as quickly as possible that the efficiencies of LTL and parcel services in aggregating and shipping freight from multiple senders together come unraveled. The necessity of shipments moving to their own individual endpoints with differing delivery requirements through a kaleidoscopically shifting series of routes and schedules resists simplicity, efficiency, and economies of scale.
For most LTL delivery services, freight is picked up in the morning for a route that is plotted to be as efficient as possible, while pickups are scheduled for the afternoon return. In rural areas, stops may be miles apart, while in urban areas traffic may create delays. The more stops are added to a route, the more complex its plotting becomes, the more downtime and waiting, and delays at any stop create delays for the remaining points. It’s no wonder that last-mile costs are estimated to be a substantial fraction of total supply chain expenses for businesses; a cost that businesses often need to absorb rather than pass on to customers.
Trends in the Delivery Market
A survey of 300 supply chain professionals in November 2019 found that roughly 4 out of 5 were experiencing pressure to improve and expand their delivery capabilities. The shifting economy was changing so fast that it had outgrown regular process management methods and forced them to juggle chaotic details through emails, spreadsheets, and paper documents. Another survey conducted around the same time found that 53% had abandoned an online shopping cart due to slow delivery times.
Ongoing shifts in consumer behavior accelerated due to the reluctance of consumers to enter brick and mortar stores early in the pandemic. Online sales in the United States in June of 2020 were up 76.2% over the same month in the previous year, and overall online retail sales increased 32.4% in 2020.
While there is a universal desire for the return to pre-pandemic normalcy, the altered consumption patterns are here to stay. Last-mile delivery is projected to grow into a $51 billion dollar market in 2022, and to continue double-digit growth through 2024.
Alternate methods of delivery
The difficulty of last-mile delivery has led to a great deal of industry speculation around potential alternatives.
- Unattended pickup. In this scenario, customers would come to a central location with designated parcel lockers and storage units to retrieve their items. However, when studied by McKinsey it was found that the high cost of real estate and more importantly, the high-value customers assigned to home delivery, made this unlikely to have much impact on the market.
- Crowdsourcing. The growth of ridesharing services such as Lyft and Uber has led to speculation that peer-to-peer delivery may provide a promising solution to the surging demand for last-mile solutions. However, when studied by dropoff this was found to be very unpopular with customers, who put a high value on professionalism in delivery.
- Automation. From self-driving delivery vehicles to drones, a great deal of attention has been spent on how to make the delivery process more efficient through automation. However, as Boxbot founder Mark Godwin explained, automated systems have enormous difficulties with non-standard packages or even the simplest obstacles, such as opening a gate, climbing a porch, avoiding a flower bed. “That last 50 feet is not going to be automated for a very long time. Definitely not in the next five years, probably not in the next 10.”
Customers have four key expectations regarding delivery.
- Speed. Overall, the expectations customers have for rapid delivery, and their frustration when that expectation is not met, increase every year. More than half of consumers report that they are willing to make their decisions based on which competitor can deliver faster service. The expectations of Millennials are growing even faster than those of the general population.
- Transparency. The surge in demand for delivery has been matched by a decline in the quality of delivery reported by customers. Increasing rates of damaged packages and late deliveries set side by side with rising expectations, have created a demand for transparency in the shipping process. Customers want to know what stage of the delivery process their shipment is in, and when they can expect arrival. Particularly during the supply chain stresses of the early pandemic, the companies which communicated openly and proactively with customers about problems and delays were better able to maintain strong relationships than those who provided passive tracking updates.
- Professionalism. Customers place a high value on the professionalism of the delivery person, which ultimately reflects on the brand being delivered. Receiving a delivery is the final step of the purchasing experience, and can make a strong positive or negative impression. While three in four customers report that professionalism is important to them, an equal proportion also reports that they want a more professional delivery experience than they are currently receiving, and 57% explained that one instance of unprofessionalism from a delivery person would make them less likely to purchase from a retailer again.
- Routing changes. One emerging consumer demand that can create a good impression is the ability to make changes to their shipping order while it is in transit, usually to send it to a different address because of a life change or in order to correct an address error. This is a particularly strong expectation among brands’ most loyal customers, three in four of whom value their previous delivery experience and expect proactive intervention to reroute or expedite shipments.
Why the last mile is the most important
In 1998 Joseph Pine and James Gilmore wrote about the coming Experience Economy, where consumers demanded not simply goods and services, but experiences. “Excellent design, marketing, and delivery,” they wrote, “will be every bit as crucial for experiences as they are for goods and services.”
With 83% of customers responding that they give as much weight to the way brands treat them as to the products they sell, the prediction seems prescient. In a different survey, 73.6% of consumers reported that delivery was key to their overall shopping experience, driving brand loyalty and trust. As the Director of Marketing Consumer Goods, Apparel & Retail at UPS recently explained in an interview, “When that package is delivered, that package being delivered is still an extension of your brand.”
Four in five of all consumers, and the same proportion of “power shoppers” who buy more than half of their goods online, say that they are unlikely to buy from a brand again after just one negative experience. Conversely, great last-mile service can reap significant benefits. One survey found that satisfied customers with positive delivery experiences were overwhelmingly likely to share those experiences with friends and family, on social media, as well as to spend more and try more offerings from their favored brand.
The Advantages of a White-Glove Delivery Service
Increasing demand and customer expectations for last-mile delivery have put shippers in a difficult spot, with consumer loyalty and brand reputation in the balance. More than ever, it is important to find the rare last-mile partner that can deliver flexible, high-quality delivery service where and when the customer needs it.
White-Glove services offer an engaged level of service and use added care beyond what is offered by other LTL carriers. Rather than optimizing for volume, their operations are optimized around customer experience, with a focus on how it positively or negatively impacts customer perception of the brand of the product they are delivering.
ExpressIT is a White-Glove pick-up and delivery service that provides key accessorial services such as dedicated delivery, after-hours delivery, inside delivery, limited access delivery, liftgate use, and debris removal – often without adding them as separate accessorial charges on top of established rates. Deliveries are made with more attention to single customers and more urgency, rather than stringing as many pickups and deliveries together as possible within a given time frame, or practicing “drop and fly” by unloading and leaving without making contact with a receiver.